MUSKEGON HEIGHTS, MI – For the first time in four years, Muskegon Heights finished a fiscal year with a positive general fund balance.

The city, which faced a large budget deficit a few years ago, showed $676,000 in the savings with its general operating fund when the 2011 fiscal year ended Dec. 31. The completed audit, which showed that positive fund balance, was presented this week during a City Council work session.

City Manager Natasha Henderson credited staff for “going beyond the call of duty” in their jobs and brainstorming creative ideas to improve the city’s financial picture. She called the general fund balance a “strong financial position” for the city.

“The city of Muskegon Heights is here to stay and is not going into (state) receivership,” Henderson said.

Some in the Muskegon area alleged that the state would need to take over the city, possibly with an Emergency Manager like the Muskegon Heights school district received in April.

Mayor Darrell Paige said he is proud of staff and council for the results of the audit.

Darrell Paige

“It just goes to show that a lot of hard work is being done,” Paige said, then cautioned officials to remain diligent. “Just because we have a fund balance doesn’t mean we can spend frivolously.”

Peter Haefner, an accountant with Vredeveld Haefner, credited city officials for cost containment and staying on budget as the reasons for the positive fund balance. He pointed out that the turnaround followed large losses in property taxes and income taxes -- two main revenue streams for the city.

The fund balance represents 11 percent of the annual general fund expenses. Henderson said she plans to propose councilmen set a goal of saving a 25 percent fund balance, making it a part of future audits.

The positive balance in the general fund also marks the completion of the deficit elimination plan in three years, well ahead of the five years required by the state. Muskegon Heights' initial $600,000 deficit elimination plan, city officials have said, was made necessary by a 2008 budget approved without the assistance of a full-time manager.

The audit shows two funds with deficits. The local streets fund has a $34,000 deficit, while the sewer fund has a $430,000 deficit. The city’s debt to Muskegon County for wastewater service reached nearly $700,000 in 2011 and the city is paying it off on a payment schedule.

In the audit’s analysis provided by city management, the key financial highlights identified for the 2011 fiscal year were a continuation of seeking and receiving grants for community improvements, fire and police personnel and equipment; an update of city ordinances and fee schedules to bring revenue more in line with costs of services; and an aggressive push to address blight and make property owners accountable to clean up or pay fines.

The water supply fund, a controversial topic between Muskegon Heights and its customer communities, shows $4.58 million in the cash and pooled investments for the end of the fiscal year. Henderson said some projects planned for the plant have yet to be completed.

Norton Shores and Fruitport Township have contended that the wholesale water rate charged by Muskegon Heights is excessive compared to the expenses to run the water plant. Muskegon Heights city officials have said their wholesale rate is less than the others charged in the area.

Norton Shores Mayor Gary Nelund said the millions of dollars sitting in the water supply fund are the reason that Norton Shores and Fruitport Township’s most recent water service proposal to Muskegon Heights requested a limit on the fund balance to 1.5 times the previous year’s operating expense. He pointed out that Norton Shores doesn’t have a problem if the money is being spent on the water plant projects outlined in the reliability study.